C corp liquidating distribution

If the total liquidating distributions you receive are less than the basis of your stock, you may have a capital loss.You can report a capital loss only after you have received the final distribution in liquidation that results in the redemption or cancellation of the stock.After the basis of your stock has been reduced to zero, you must report the liquidating distribution as a capital gain.Whether you report the gain as a long-term or short-term capital gain depends on how long you have held the stock.This is usually the case in bankruptcy liquidations.Creditors are always senior to shareholders in receiving the corporation's assets upon winding up.

When a company has more liabilities than assets, equity is negative and no liquidating distribution is made at all.

The expenses of selling the assets are normally charged against the gain for each asset.

If a shareholder incurs liquidation costs in effecting a complete liquidation, the costs should be classified as capital expenditures.

Legally, an asset sale is preferred as well – it is easier to define what liabilities are included or excluded from the sale.

To avoid double taxation, sellers often want a stock sale so that they are taxed primarily at capital gains rates.